We are faced with enormous change in the legal marketplace: primarily, a slew of new competitive and disruptive forces are mounting increasingly formidable challenges to our traditional assumptions, understandings about legal work, and business models.

And the Walls Came Down - Disruptive Changes in the Legal Marketplace

By Jordan Furlong

---Jordan Furlong is a sought-after speaker delivering dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes that are currently under way in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.
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At the same time, we are grappling with a legal and justice system that is not giving anyone much satisfaction, and is in fact giving many people a great deal of heartache. There are numerous disconnects among how things used to be in the law, what they’re like today, and what we wish they would be.

So what can we do? Perhaps not surprisingly, I say we adapt. We need to see the legal world as it is and as it surely will become, and then we imagine what it might be and do everything we can to make that vision real. Our memories, our narratives, our assumptions and expectations about the law — both individual and collective — these are the walls we’ve built around the legal market and around ourselves, and they are limiting our vision. It’s time to lower the walls and let illumination come in.

Let’s begin by seeing the legal world as it is. What are we up against? What are we dealing with? Here are five points to get us started.

Growth in lawyers’ business has stalled. With a few exceptions, law firms of all sizes have seen business slow down, revenues flatline or decrease, and new business become increasingly difficult to find.

Lawyers’ pricing is under tremendous pressure from clients. I mean “pricing” in both a dollar amount sense — rate discounts are multiplying — and as a methodology — flat fees are proliferating.

Low-cost alternatives to lawyers are picking up business. Large firms have seen the rise of law department insourcing and legal business outsourcing. Smaller firms have seen Legal Zoom, Rocket Lawyer and the like target their markets.

A huge glut of unemployed new lawyers is building up. Employment rates for new lawyers in the United States have fallen sharply in the wake of the financial crisis. At large law firms, they’ve fallen off a cliff — down 40% in the last five years.

And finally, although you may not have felt it, an earthquake struck the legal profession earlier this year. Its epicenter was London: it was the issuance of the first licenses to operate what’s called Alternative Business Structures, law firms owned by non-lawyers.

These, at least, are not predictions or suppositions. This is really happening, right now. And it’s happening because of a series of changes to the legal marketplace, both here in the US and worldwide. Once again, I’ll give you five to consider.

A lengthy period of strong economic growth powered by heavy borrowing, interspersed with occasional hyper-growth bubbles and busts, has come to an end. We are not in a “recession,” in the usual sense of the word. We are in a lengthy period of slow deleveraging and weak, fitful growth. It should last at least another five years, and maybe longer, give or take a fiscal cliff, a Euro collapse, or a hard landing for China’s housing boom.

Clients have acquired a potent combination of knowledge, power and urgency. Basic legal information is more widely available today than ever before. Basic legal tools are easily accessible at low cost or no cost across the internet. And clients cannot and will not spend a dollar more than they absolutely must on anything, and most especially on lawyers.

New providers and new technology are starting to enter the market. I mentioned companies like LegalZoom and legal process outsourcers a moment ago, companies in their infancy that have already generated a surprising amount of business. But there’s also new, disruptive technology that can replicate basic lawyer functions and, in some cases, more complex lawyer functions.

Generational change continues. We tend to forget about this — partly, I think, because everyone was talking about the rise of the millennials and the retirement of the boomers, right up until the financial crisis. And then suddenly, we didn’t hear much about work-life balance anymore. But generational turnover continues, and it affects legal organizations of every kind. And let’s not forget: it also affects clients. The cultural values of both legal buyers and legal sellers are slowly transforming.

Finally, the regulatory environment for legal services is changing. Lawyer self-regulation is gone in Australia and it’s gone in England and Wales. In my home province of Ontario, paralegals are members in full standing of the Law Society of Upper Canada, lawyers’ governing body. The United States will hold out against this trend longer than anyone else — except possibly India — but its arrival here is still only a matter of time. Lawyers will be sharing the market with non-lawyers, and I cannot overstate how important that will prove to be.

So where will this lead us? What does the “future of the legal profession” look like? Here are some of the key features I think we can expect in the legal marketplace of the future.

—— 1. Systems and technology will make substantial inroads into the legal market. ——

Today, if someone asks me, “Can machines replace lawyers?” I’m inclined to say, “Well, only if the lawyer in question isn’t very good.” Now, that’s a little harsh, and it’s not entirely fair — to either the lawyer or the machine. If you were to ask me instead, “Can a machine replace aspects of what lawyers currently do?” — well, that’s a different question, and the answer in many cases is yes.

Automated contract creation, data-crunching analysis systems, expert applications that answer regulatory and compliance questions, online dispute systems powered by game theory — all these programs are available right now. They are solidly built, they are attracting investor interest, and they are only going to get better as they grow. They do their jobs in minutes, not in billable hours, and they are more reliable and sophisticated than many lawyers would be prepared to credit.

We’re at least 10 years away, probably more, from machines that can completely replace lawyers. But we’re already in the era when machines can displace lawyers — take on some aspects of their work, some percentage of their tasks, bump them aside, jostle into their seats, force them to go do something else. And that percentage is going to grow. I can’t tell you at what rate, or how quickly. It will be different for different markets and different types of work.

But the fact is that a great deal of what most lawyers do is not that complicated. At least some of it can be done by non-lawyers — and in some firms, it already is, by secretaries, paralegals and clerks; in future, it will be done by machines, processes and systems. But in many law firms today, it’s being done by lawyers. It’s what many of the hours billed in the legal profession today consist of — and that is not sustainable. That’s a hard truth. But we need to hear it said.

—— 2. Non-lawyers will have proliferated throughout the market.——

I dislike that term intensely, by the way: “non-lawyers.” We are the only profession I know that divides the world into “us” and “not us.” We use that term all the time, and we rarely appreciate how insulting it is to the people thus described.

But non-lawyers are coming. We are going to share this market with them. The sooner we accept that and start working to accommodate its impact, the better. They’re coming because they are proving their abilities and reliability every day. They’re coming because lawyers have claimed too much territory under the all-powerful description “the practice of law,” too many activities that do not require a lawyer’s rare and valuable skill and judgment.

And they are coming because we have done a lousy job of serving the entire legal market. Clients, both individual and corporate, are spending more and more and waiting longer and longer for outcomes that leave them less and less satisfied. And that’s just the people who can afford lawyers and the legal system in the first place. Many people are not even in the game at all.

And that is on us. These problems developed on our watch, under our administration and stewardship of the legal system. They are our responsibility. We have had ample opportunity to rectify them, and as everyone here knows, we have not moved fast enough or far enough. So governments and citizens are going to start saying, “Time to let someone else try.” Time to start putting the “Unauthorized Practice of Law” in the history books. Look at what’s happening in England and Wales, and recognize that eventually, inevitably, it will happen here.

—— 3. The legal profession will be smaller, but also more specialized and successful, than it is today. ——

I don’t really see a way around a smaller bar. Gradually, year by year, innovations will continue to disrupt the legal profession. The capabilities of providers outside our profession will expand, from lawyers in India to para-professionals in North America to software packages in the cloud. Lawyers simply will not be necessary to accomplish things that required our services in the past.

It’s possible that we may still need more than 1.1 million lawyers in the United States ten years from now. But I don’t see it as probable. What I see as probable is an endgame for a legal education system that is already producing more law graduates than the market can employ and far more than it will need in future. And I don’t see any likelier outcome than that dozens of law schools will find themselves superfluous to the new legal market.

I do think we will need fewer lawyers. But I also think that the tasks those lawyers end up doing will, on average, be more valuable, more sophisticated, more demanding, and more remunerative than they are today. I think that a market will emerge for more sophisticated legal needs, a robust market that needs lawyers to provide counsel, wisdom, advocacy and preventive law services — the fence at the top of the cliff, as Richard Susskind says, rather than the ambulance at the bottom.

This is where I think the modern law firm has made its greatest mistake. It keeps trying to force more and more low-value, hourly-billed work out of a resource — real, live, human lawyers — that is intrinsically intended to provide high-value work. We’re not meant to spend our days filling out documents and conducting basic transactions and providing “commodity” services. That’s not why we went to law school. We’re supposed to be put to a higher, better use. Call me a cockeyed optimist — not many people do — but I believe that in the future legal market, that’s what will emerge.

It’s not just our clients that would benefit from this, nor just the latent legal market that would finally be tapped by a wider, deeper range of fully accessible legal service providers at affordable prices. We would benefit from this. We are professionals, and if you trace that word back to its Latin roots, you’ll find that it comes from the Latin profiteri, “to serve.”

We are a serving profession. We are fiduciaries to our clients, ambassadors of the rule of law, foundation stones for a civil society. Or at least, we’re meant to be, although I think we’ve lost our way a little over the past few decades. But I believe, in future, that’s what we can become again. And we should be a happier, more fulfilled profession as a result, because we’ll be better aligned with our best use and our best purpose.

In the words of IAALS’s mission statement, we need “continuous improvement” in the legal system — constant development, ongoing innovation, relentless efforts to make tomorrow’s reality better than today’s. We need to challenge assumptions, break down walls, illuminate the landscape.

My advice to you, in this ongoing effort, is tolook beyond the walls of the legal profession, beyond the boundaries of what we have always taken for granted, always assumed is the normal state of affairs in legal services. It’s not normal; it never really was. As a profession, we need to be prepared to let go of our defenses and preconceptions, to lower the walls we’ve built around ourselves and our clients.

We need to recognize that we’re not the only ones who can help. There are other people, other solutions out there that want to help improve the legal system too. Yes, they’re a little unsteady on their feet. Yes, they’re still getting the hang of it. But they want to help, and they can help — and whether we like it or not, eventually, they will help. If and when they displace us, then it’s up to us to find a new, better place and a new, better purpose.

The only real question is whether we’ll extend our hand, and how long it will take for us to do that, to build the future legal marketplace and reforge our profession at the same time. If we do, then I’m hopeful and confident that that future will arrive a lot sooner than we think.

This article is a condensed version of Jordan Furlong's speech to the Institute for the Advancement of the American Legal System (IAALS), an innovative program headquartered at the University of Denver that addresses reforms to legal education, access to justice, and judicial selection. It was first published in Law21, one of the foremost law blogs in North America.